The situation has no effect on the other members of the Hungarian financial institution system, which are serving their customers stably and in the usual order, the Hungarian National Bank outlined.Continue reading
Sberbank, Russia’s largest lender, announced on Wednesday that it was leaving almost all European markets. Prior to the decision, the European Central Bank (ECB) had already ordered the closure of the bank’s European division. As a result, the Hungarian National Bank has revoked the operating license of its subsidiary – Sberbank Hungary, and ordered its discontinuance, under which the bank’s customers may receive compensation of up to EUR 100,000. The payments began on Thursday.
On Tuesday evening, the National Bank of Hungary (NBH) announced that the European Single Resolution Board had launched closing proceedings at the parent institution of Sberbank Hungary, the Austrian Sberbank Europe AG. Then the NBH revoked Sberbank Hungary Ltd.’s operating license and ordered its termination due to the serious liquidity and capital problems of the Hungarian credit institution.
Prior to this, the NBH had first ordered a two-day bank holiday for Monday and Tuesday for Sberbank Hungary, and on Tuesday announced that it would impose a HUF 7 million deposit withdrawal limit at the bank for 30 days from Wednesday. However, before this could take effect, the above announcement was made, which means the end of all the bank’s operations.
“What happened to Sberbank [Hungary] is an isolated case, the Hungarian Banking System is stable, exposures are not reaching dangerous levels for insurers, banks, or financial service providers,” stressed Csaba Kandrács, the NBH’s Deputy Governor responsible for financial supervision and consumer protection at an online conference on Wednesday.
Since the market share of the Hungarian Sberbank is only around one percent, its liquidation will not cause any problems with the financial stability of the Hungarian banking system. Neither does the fact that the EU has determined which seven Russian banks will be excluded from the SWIFT system, as none are active in Hungary.
The Deputy Governor of NBH said that although the operation of the Hungarian Sberbank had been stable, the lack of liquidity at the bank – partly due to sanctions against the Russian owner and partly due to the international partners’ turning away because of the crisis of confidence – caused serious difficulties in the operation of the financial institution. This was already reported to the supervisory authority over the weekend, which started to investigate what measures could be taken to stabilize operations. But as the Hungarian bank had significant deposits in the Austrian Sberbank, the liquidity and solvency problems that arose left no other solution but to shut down.
Although the NBH tried to find a market player to take over the operation of the bank on market terms, no such player was found. Csaba Kandrács added that a buyer was expected to be found quickly as Sberbank Hungary had “an otherwise healthy” credit portfolio.
Depending on the actual amount of their deposit, Hungary’s National Deposit Insurance Fund (NDIF) will reimburse depositors with insured claims up to EUR 100,000 (a bit over HUF 38 million) within ten working days from Thursday under the Act on Credit Institutions. Based on the information provided by Sberbank Hungary to the NDIF, the reimbursement will take place automatically, without the need for customers to request it from the NDIF.
There are three ways for affected depositors to receive compensation. Depositors can request the money to be transferred to a bank account at another bank, in the absence of a bank account at banks that handle the payouts, which will be designated soon, and smaller amounts of money can also be requested by postal transfer.
The Deputy Governor also stressed that in the past 29 years, the NDIF has always delivered on time. He also emphasized that as a buyer was expected to be found quickly, anyone with a deposit of over EUR 100,000 could expect further returns later on.
The payments to depositors started on Thursday. According to Index, a few tens of thousands of clients are affected by the bank’s closure, including around 16,000 businesses, of which around six thousand have accounts with Sberbank alone.
Meanwhile, press reports suggest the opening of new accounts by former Sberbank customers has led to higher customer traffic than before in the branch networks of several domestic banks.
Although the EUR 100,000 limit (hopefully) provides sufficient protection for the majority of private individuals, several Hungarian municipalities also banked with Sberbank Hungary. As a result, the government will immediately provide a total of HUF 282 million to twelve local governments “in order to preserve the functioning of the municipalities.”
There’s one major town among the affected – the medium-sized city of Nagykanizsa in southwestern Hungary. It alone will receive HUF 161 million in support. The only other town on the list is Pilisvörösvár, while other municipalities are all villages.
According to a summary by Reuters, Russian Sberbank, which reported record profits in 2021, said on Wednesday that they were leaving the European market as its subsidiaries faced large cash outflows and threats to the safety of employees and property. The move by Russia’s biggest lender seemed inevitable after its European division was closed by order of the European Central Bank.
Sberbank operated in Austria, Croatia, Germany, and Hungary, among other countries, and had European assets worth 13 billion euros on Dec. 31, 2020.
Featured photo by Noémi Bruzák/MTI
